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Cabinet Office circular

CO (17) 3: Impact Analysis Requirements

Issue date: 
Friday, 30 June 2017
Issue status: 
Current
Version note: 

Intended for

  • All Ministers
  • All Chief Executives
  • Chief Parliamentary Counsel
  • Clerk of the House
  • Senior Private Secretaries
  • Private Secretaries
  • All officials involved in the preparation of Cabinet papers

Introduction

1This circular sets out the requirements for Ministers and agencies seeking approvals relating to government regulatory proposals.

2This circular replaces the previous Cabinet requirements for regulatory impact analysis. It reflects Cabinet’s decision in 2017 to revise its Impact Analysis Requirements to more effectively support regulatory decision-making.1

3The Impact Analysis Requirements incorporate the Government Expectations for Good Regulatory Practice.2 Regulatory agencies are expected to adopt a whole-of-system view, and take a proactive, collaborative approach to the care of the regulatory systems(s) within which they work. The Impact Analysis Requirements focus in particular on the expectation that agencies provide robust analysis and advice to Ministers before decisions are taken on regulatory change.   

4This circular outlines the purpose and role of the Impact Analysis Requirements and sets out the requirements. It covers the following:

4.1government regulatory proposals

4.2early engagement to support high quality Impact Analysis

4.3exemptions from providing a Regulatory Impact Assessment

4.4content and form of Regulatory Impact Assessments

4.5Quality Assurance arrangements

4.6the “Impact Analysis Requirements” section in Cabinet papers

4.7government regulatory proposals with inadequate Impact Analysis, and

4.8publication of Regulatory Impact Assessments and Supplementary Analysis Reports.

5The Impact Analysis Requirements as approved by Cabinet in April 2017 apply from the date of publication of this circular.3 An overview of the new requirements approved in April 2017 and discontinued requirements is attached as Annex 1. The Regulatory Impact Assessment templates, Quality Assurance criteria, Treasury forms and guidance on the Impact Analysis Requirements are all available on the Treasury website (www.treasury.govt.nz/regulation).

6Ministers and Chief Executives should ensure that:

6.1all staff involved in the preparation of submissions for Cabinet and Cabinet committees are familiar with the contents of this circular;

6.2the material in this circular is conveyed to all Crown entities and State sector agencies which are involved in policy initiatives relating to government regulatory proposals.

Purpose and role of the Impact Analysis Requirements

7The Impact Analysis Requirements support and inform the government’s decisions on proposals for regulatory change. They are both a process and an analytical framework that encourages a systematic and evidence-informed approach to policy development.

8The Impact Analysis framework involves defining the policy or operational problem that needs to be addressed, identifying the policy objectives and full range of feasible options for addressing that problem, analysing those options for their potential impacts and assessing their costs, benefits and risks, carrying out consultation, implementation planning, and arrangements for ongoing monitoring, evaluation and review.

9The Impact Analysis Requirements are intended to help advisers and decision-makers avoid the potential pitfalls that arise from natural human biases and mental short-cuts, including by seeking to ensure that:

9.1the underlying problem or opportunity is properly identified, and is supported by available evidence;

9.2all practical options to address the problem or opportunity have been considered;

9.3all material impacts and risks of proposed actions have been identified and assessed in a consistent way, including possible unintended consequences; and

9.4it is clear why a particular option has been recommended over others.

10The Impact Analysis Requirements also contribute to the transparency and accountability of government through the routine publication of Regulatory Impact Assessments.

Government regulatory proposals

11All policy proposals taken to Cabinet for approval that include a government regulatory proposal must be accompanied by a Regulatory Impact Assessment, unless an exemption applies.4

12A Regulatory Impact Assessment is a government agency document in which the agency provides a summary of its best advice on the Impact Analysis relating to a government regulatory proposal. This Impact Analysis should be completed and summarised before the Cabinet paper is drafted. 

13A “government regulatory proposal” means a proposal that will ultimately require creating, amending, or repealing primary or secondary legislation.5

This includes proposals which involve:

13.1decisions to introduce legislative changes that are merely enabling (the substantive decisions as to whether and what sort of intervention will be made later), including creating or amending a power to make secondary legislation;

13.2decisions to create, or amend, a statutory authority to charge third parties to cover the costs of a government activity (i.e. cost recovery proposals);

13.3the development of discussion documents that include options that may lead to regulatory change;

13.4 “in principle” policy decisions and intermediate policy decisions, particularly those where regulatory options are narrowed down (e.g. limiting options for further work/consideration);

13.5seeking negotiating mandates for, concluding, or seeking approval to sign treaties with regulatory impacts;6

13.6when secondary legislation is made by a Minister under an enabling power in an Act and the Minister’s decision is referred to Cabinet for noting.

14A Regulatory Impact Assessment must be provided when papers are submitted to Cabinet committees for policy approval. In rare circumstances, the policy proposal and draft legislation may be submitted together. In these cases, the usual procedure is for the paper to be submitted to the relevant Cabinet policy committee rather than directly to the Cabinet Legislation Committee.

15During the parliamentary process, it often becomes necessary to amend a bill. The policy content of the amendments may be such that further approvals from Cabinet are needed for new policy or to alter existing policy approvals. If so, the original Regulatory Impact Assessment should be updated to indicate how the changes affect the agency’s Impact Analysis (e.g. how they alter the nature and/or magnitude of the impacts).

Early engagement to support high quality Impact Analysis

16Inadequate Impact Analysis often arises from incomplete problem definition, and unclear objectives and a failure to consider all feasible options. As these are key foundations of policy analysis, inadequacies in these areas cannot be easily fixed at a later stage, with consequent impacts on the quality of the Impact Analysis. 

17Treasury’s Regulatory Quality Team and the relevant Treasury policy team will, therefore, provide feedback on these areas at the request of the agency policy team. This feedback is most effectively provided in the early stages of policy development. It will focus on the types of things a Quality Assurance panel would look for in the final assessment of the problem definition, objectives and options identification. Early indications of what is expected should assist agencies to plan and develop their analysis. The feedback will be provided within a reasonable timeframe on a best-endeavours basis.

18It is strongly recommended that agencies seek this feedback, including from their Quality Assurance panel or specialist. This assistance may be especially valuable when the agency considers that the problem is important in terms of its human, social, economic or environmental impacts, and that the policy process is likely to explore material options to create, amend or repeal primary or secondary legislation.

19This information can be provided as soon as agencies have some initial ideas to test, and before they proceed further with the analysis. There is an engagement form available for this purpose on the Treasury website, or agencies may have their own document which sets out information on the proposed problem definition, objectives and options.

20If it is already apparent at this point that the Impact Analysis Requirements are applicable (and how they will apply) to the policy exercise, Treasury will also confirm this as part of the early feedback. Otherwise this can be confirmed at a later stage.

Exemptions from providing a Regulatory Impact Assessment

21While use of the Impact Analysis framework is encouraged and always recommended in the development of advice on any form of government policy initiative, a Regulatory Impact Assessment is not required for certain types of government regulatory proposals.

Technical or case-specific exemptions

22A Regulatory Impact Assessment is not required where Treasury is satisfied that a government regulatory proposal:

22.1is suitable for inclusion in a revision Bill (as provided for in the Legislation Act 2012);

22.2is suitable for inclusion in a Statutes Amendment Bill (as provided for in Standing Orders);

22.3would repeal or remove redundant legislative provisions;

22.4provides solely for the commencement of existing legislation or legislative provisions;

22.5is solely a request to authorise spending in an Appropriation Bill or an Imprest Supply Bill;

22.6is solely a request for confirmation of secondary legislation that has already been made;

22.7implements deeds of settlement for Treaty of Waitangi claims, other than those that would amend or affect existing regulatory arrangements;

22.8brings into effect recognition agreements under the Marine and Coastal Area (Takutai Moana) Act 2011; or

22.9is essential (the minimum necessary) in order to comply with existing international obligations that are binding on New Zealand.

Minor impacts exemption

23A Regulatory Impact Assessment is not required where Treasury is satisfied that a government regulatory proposal has no or only minor impacts on businesses, individuals or not-for-profit entities. This might, for instance, be the case for certain changes to the internal administrative or governance arrangements of the New Zealand government, such as the transfer of responsibilities, staff, or assets between government agencies.

Discretionary exemptions

24A Regulatory Impact Assessment may not be required where Treasury is satisfied that a government regulatory proposal fits within the following situations:

24.1the relevant issues have already been adequately addressed by existing Impact Analysis; or

24.2a Regulatory Impact Assessment would be substantively duplicated by other government policy development, reporting and publication requirements or commitments (e.g. the preparation of a discussion document, National Interest Analysis or Better Business Case); or

24.3the government has limited statutory decision making discretion or responsibility for the content of proposed delegated legislation; and

24.4formal Impact Analysis is not the best and most cost-effective way to ensure that Ministers have access to relevant information to inform their decisions.

25An exemption granted under paragraph 24 may be subject to conditions, such as the inclusion, provision and/or publication of specific information (e.g. incorporating elements of the Impact Analysis framework in a discussion document, National Interest Analysis or Better Business Case). Depending on the nature of the conditions, they may be fulfilled before or after the relevant Cabinet paper is submitted.

Seeking an exemption

26Whether an exemption applies is determined by Treasury based on the information an agency provides for each proposal, or aspects of a proposal, on the specific exemption sought and the agency’s reasons as to why the exemption applies. There is an application form available for this purpose on the Treasury website.

27The process for exemptions sought under paragraph 24 is likely to include discussion between Treasury and the agency. These discussions will include matters such as:

27.1how the Impact Analysis Requirements have already been met;

27.2why further Impact Analysis is not the best and most cost-effective way to provide Ministers with information relevant to their decision-making;

27.3the extent to which government’s decision making discretion or responsibility has been constrained;

27.4the potential conditions of any exemption.

28Where an exemption applies, Treasury will provide the agency with a statement for inclusion in the relevant Cabinet paper (see paragraph 40 below).

Content and form of Regulatory Impact Assessments

29The Regulatory Impact Analysis templates tailor the form and content of the Regulatory Impact Assessment to the nature and significance of the regulatory proposal. These templates are available on the Treasury website.

30Impact Analysis must be presented using the Regulatory Impact Assessment template (unless agreed otherwise) determined by Treasury following consideration of information provided by the agency about its processes and on the particular proposal. Agencies must use the confirmation form available for this purpose on the Treasury website.

31Treasury may on a case by case basis agree with the agency to depart from the Regulatory Impact Assessment templates.

32The Regulatory Impact Assessment must be signed off by a responsible manager, and must disclose information to highlight any key gaps, assumptions, dependencies and significant constraints, caveats or uncertainties regarding the Impact Analysis.

Quality Assurance arrangements

33All Regulatory Impact Assessments must be independently quality assured against the Quality Assurance criteria set out on the Treasury website. The Quality Assurance criteria are the same regardless of who carries out the Quality Assurance.

34Quality Assurance arrangements are determined by Treasury following consideration of information provided by the agency about its processes and on the particular proposal. Agencies must use the confirmation form available for this purpose on the Treasury website.

35Whether the agency or Treasury’s Regulatory Quality Team is responsible for arranging Quality Assurance is determined by Treasury based on the following criteria:

35.1the agency’s policy capability and the demonstrated robustness of its in-house quality assurance processes;

35.2the strength of the agency’s regulatory stewardship practice in the affected regulatory system;

35.3the robustness of the planned policy process;

35.4the level of significance of the likely impacts; and

35.5the levels of risk or uncertainty around the likely impacts.

36Where the agency is responsible for arranging Quality Assurance, the agency must ensure it is done by a person or group not directly involved in preparing the Regulatory Impact Assessment, and nominated by the responsible agency’s Chief Executive.

37The decision that the agency is responsible for arranging Quality Assurance is not necessarily final. The conditions on which the decision is made are set out and agreed with the agency. If any of the conditions change (e.g. timeframes become compressed or the policy initiative is rescoped) then the agency must advise Treasury’s Regulatory Quality Team and the decision will be reviewed.

38A statement by the Quality Assurance assessors on the overall quality of the Regulatory Impact Assessment must be provided in the Cabinet paper (see paragraph 41.2 below). The quality assured Regulatory Impact Assessment should be lodged with the Minister’s Cabinet paper.

The “Impact Analysis Requirements” section in Cabinet papers

39Cabinet and Cabinet committee papers that contain government regulatory proposals must contain a section entitled “Impact Analysis Requirements”.

40If an exemption applies, this section must contain a statement from Treasury confirming that the proposal, or aspects of it, is exempt from the requirement to provide a Regulatory Impact Assessment and, if relevant, any conditions of the exemption.

41If an exemption does not apply, this section must contain two parts, as follows:

41.1a statement by the responsible agency that the Impact Analysis Requirements apply and, therefore, a Regulatory Impact Assessment is required and is attached to the Cabinet paper; and

41.2a statement by the Quality Assurance assessors providing an independent assessment of the overall quality of the Regulatory Impact Assessment.

Government regulatory proposals with inadequate Impact Analysis

42A government regulatory proposal has inadequate Impact Analysis if:

42.1there is no accompanying Regulatory Impact Assessment and Treasury has not exempted the proposal from the Impact Analysis Requirements; or

42.2the accompanying Regulatory Impact Assessment has not been independently quality assured or has been assessed as “does not meet” the Quality Assurance criteria.

43The Chairs of Cabinet committees have discretion on whether papers containing government regulatory proposals with inadequate Impact Analysis are considered.

44The Treasury may advise the Minister of Finance and the Minister for Regulatory Reform of any government regulatory proposal with inadequate Impact Analysis.

45If a government regulatory proposal with inadequate Impact Analysis proceeds to discussion at a Cabinet committee, and substantive decisions are made:

45.1the responsible Minister must provide a Supplementary Analysis Report, and

45.2the nature and timing of this report must be agreed by the responsible Minister and the Minister for Regulatory Reform.

46The Supplementary Analysis Report must be Quality Assured and published along with the original Regulatory Impact Assessment (if any).

Publication of Regulatory Impact Assessments and Supplementary Analysis Reports

47The full text of all Regulatory Impact Assessments and Supplementary Analysis Reports must be published on the websites of the administering agency and the Treasury. In relation to Bills, the URL (rather than the full text) is to be provided in the Explanatory Note.

48Hard copies of Regulatory Impact Assessments, and Supplementary Analysis Reports if any, must be provided to select committees (or the House of Representatives if the Bill is passed under urgency).

49When a Regulatory Impact Assessment or Supplementary Analysis Report is ready to be published, the agency must send for each Regulatory Impact Assessment and Supplementary Analysis Report, the agency website link and an electronic (Word) copy to Treasury’s Regulatory Quality Team at ria@treasury.govt.nz.

Further information

50If you require further advice or information on the Impact Analysis Requirements, please contact the Regulatory Quality Team or your Treasury Policy Team.

51Detailed guidance on meeting the government’s Impact Analysis Requirements and preparing a Regulatory Impact Assessment is available on the Treasury’s website at: http://www.treasury.govt.nz/regulation.

52The changes set out in this circular will be reflected in the CabGuide (available on the Cabinet Office website at http://cabguide.cabinetoffice.govt.nz) in due course. If you require further advice or information about Cabinet procedures, please contact the relevant Cabinet committee secretary.

Michael Webster
Secretary of the Cabinet

Enquiries:

Regulatory Quality Team in the Treasury
Your Treasury Policy Team

Website reference:
This circular can be found on the internet at:
http://www.dpmc.govt.nz/cabinet/circulars/.

 

Annex 1: Overview of the new Impact Analysis Requirements approved in April 2017 and discontinued requirements

1The main changes to the Impact Analysis Requirements as approved by Cabinet in April 2017 are:7

1.1additional new grounds for a discretionary exemption from the Impact Analysis Requirements;

1.2new criteria to determine who arranges Quality Assurance, including making greater use of agency Quality Assurance of significant government regulatory proposals;

1.3new Regulatory Impact Assessment templates for agencies to present their Impact Analysis to Cabinet;

1.4introducing Cabinet Committee chair discretion on whether government regulatory proposals with inadequate Impact Analysis are considered;

1.5requiring a Supplementary Analysis Report for government regulatory proposals with inadequate Impact Analysis that have been the subject of substantive Cabinet decisions.

2The above changes are underpinned by the following objectives:

2.1increase the use of robust analytical frameworks, in particular to encourage analysis grounded in microeconomics and the government expectations for good regulatory practice;

2.2ensure the Impact Analysis Requirements better reflect and support the stages of policy development, in particular by encouraging early and ongoing Impact Analysis and advice;

2.3focus the efforts of agencies on those proposals where Impact Analysis is of most value.

3From 30 June 2017, there is no longer a requirement for a post-implementation review for significant government regulatory proposals that proceed with inadequate Impact Analysis [CAB Min (09) 27/11]. This has been replaced by the requirement for a Supplementary Analysis Report.8

4From February 2013, there is no longer a requirement for Ministers to certify in the Cabinet paper that they have considered whether the proposals are consistent with the expectations set out in the Government Statement on Regulation of August 2009.9

Footnotes:

1 See CAB-17-MIN-0148.

3 To ease the transition to the new requirements, agencies may still present their Impact Analysis in the previous Regulatory Impact Statement (RIS) template up until 4 August 2017. From 7 August 2017, all Impact Analysis presented to Cabinet should use the appropriate Regulatory Impact Assessment template, unless agreed otherwise by Treasury.

4 Exemptions from the requirement to provide a Regulatory Impact Assessment are set out in paragraphs 22 to 25.

5 “Secondary legislation” means all legislation that is not primary legislation, see Legislation Bill 2017.

6 In accordance with the Cabinet Manual and Standing Orders 397 to 400, all multilateral treaties or “major bilateral treaties of particular significance” concluded by New Zealand require the preparation of a National Interest Analysis. The National Interest Analysis drafting guidelines can be found in the International Treating Making Guide available on the Ministry of Foreign Affairs & Trade website (http://www.treaties.mfat.govt.nz/download/3).

7 See CAB-17-MIN-0148.

8 Ibid, rec 20.

9 See SEC Min (13) 2/2.

Last updated: 
Wednesday, 28 June 2017

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